Question 1

Public policy to eliminate a recessionary gap could involve an increase in taxes.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following will decrease the short-run aggregate supply?

Accepted Answer

A) an increase in wages 
B) an increase in the labor force 
C) a decrease in net exports 
D) a decrease in the personal income tax rates 
A) an increase in wages 
B) an increase in the labor force 
C) a decrease in net exports 
D) a decrease in the personal income tax rates

Question 3

Suppose the U.S.government decides to increase its imports from Turkey.All other things unchanged,

Accepted Answer

A) U.S.aggregate demand increases and Turkey's aggregate demand decreases. 
B) U.S.aggregate demand decreases and Turkey's aggregate demand increases. 
C) U.S.aggregate demand and Turkey's aggregate demand increase. 
D) U.S.aggregate demand is not affected but Turkey's aggregate demand increases. 
A) U.S.aggregate demand increases and Turkey's aggregate demand decreases. 
B) U.S.aggregate demand decreases and Turkey's aggregate demand increases. 
C) U.S.aggregate demand and Turkey's aggregate demand increase. 
D) U.S.aggregate demand is not affected but Turkey's aggregate demand increases.

Question 4

The aggregate demand curve shifts due to changes in consumption expenditures, investment expenditures, government purchases, or net exports.

Accepted Answer

A) True 
 B)False

Question 5

All other things unchanged, an increase in exports relative to imports will

Accepted Answer

A) cause a movement upward along a given aggregate demand curve. 
B) cause a movement downward along a given aggregate demand curve. 
C) shift the aggregate demand curve to the right. 
D) shift the aggregate demand curve to the left. 
A) cause a movement upward along a given aggregate demand curve. 
B) cause a movement downward along a given aggregate demand curve. 
C) shift the aggregate demand curve to the right. 
D) shift the aggregate demand curve to the left.

Question 6

What happens in the domestic economy when there is an increase in foreign prices, all other things unchanged?

Accepted Answer

A) Net exports and aggregate demand fall. 
B) Net exports fall and aggregate demand increases. 
C) Net exports and aggregate demand increase. 
D) Net exports rise and aggregate demand falls. 
A) Net exports and aggregate demand fall. 
B) Net exports fall and aggregate demand increases. 
C) Net exports and aggregate demand increase. 
D) Net exports rise and aggregate demand falls.

Question 7

Suppose the economy is initially in long-run equilibrium.Which of the following events leads to an increase in the price level and a decrease in real GDP in the short run?

Accepted Answer

A) a decrease in health insurance premiums paid by firms raises the cost of employing labor 
B) an increase in government transfer payments 
C) an increase in the cost of a key input such as oil 
D) a sharp fall in stock market prices 
A) a decrease in health insurance premiums paid by firms raises the cost of employing labor 
B) an increase in government transfer payments 
C) an increase in the cost of a key input such as oil 
D) a sharp fall in stock market prices

Question 8

What are the four sources of aggregate demand?

Accepted Answer

A) consumption, private investment, taxes, and expenditures 
B) consumption, private investment, wage increases, and government expenditures 
C) consumption, private investment, expenditures, and net exports 
D) consumption, private investment, government purchases, and net exports 
A) consumption, private investment, taxes, and expenditures 
B) consumption, private investment, wage increases, and government expenditures 
C) consumption, private investment, expenditures, and net exports 
D) consumption, private investment, government purchases, and net exports

Question 9

Public policy to eliminate inflationary or recessionary gaps is called stabilization policy.

Accepted Answer

A) True 
 B)False

Question 10

When an economy fails to produce at its potential,
I.there may be actions that the government or the central bank can take to push the economy toward its potential.
II.the unemployment rate is below its natural rate.
III.the average price level is likely to rise.

Accepted Answer

A) I, II, and III 
B) I and II only 
C) I and III only 
D) I only 
A) I, II, and III 
B) I and II only 
C) I and III only 
D) I only

Question 11

Aggregate demand is the total value of real GDP that

Accepted Answer

A) all sectors of the economy are willing to purchase at various average price levels, all other things unchanged. 
B) all sectors of the economy are willing to sell at various average price levels, all other things unchanged. 
C) consumers are willing to purchase at various average price levels, all other things unchanged. 
D) consumers are willing to purchase at various national income levels, all other things unchanged. 
A) all sectors of the economy are willing to purchase at various average price levels, all other things unchanged. 
B) all sectors of the economy are willing to sell at various average price levels, all other things unchanged. 
C) consumers are willing to purchase at various average price levels, all other things unchanged. 
D) consumers are willing to purchase at various national income levels, all other things unchanged.

Question 12

The aggregate demand curve shifts when the quantity of real GDP demanded at every price level changes.

Accepted Answer

A) True 
 B)False

Question 13

All other things unchanged, a higher exchange rate

Accepted Answer

A) reduces net exports and aggregate demand. 
B) reduces net exports and increases aggregate demand. 
C) increases net exports and aggregate demand. 
D) increases net exports and reduces aggregate demand. 
A) reduces net exports and aggregate demand. 
B) reduces net exports and increases aggregate demand. 
C) increases net exports and aggregate demand. 
D) increases net exports and reduces aggregate demand.

Question 14

Which of the following will increase the short-run aggregate supply?

Accepted Answer

A) an increase in wages 
B) a decrease in the price of capital 
C) an increase in government spending on education 
D) an increase in consumption spending 
A) an increase in wages 
B) a decrease in the price of capital 
C) an increase in government spending on education 
D) an increase in consumption spending

Question 15

The long-run aggregate supply curve

Accepted Answer

A) relates the level of nominal output produced by firms to the implicit price deflator. 
B) relates the level of output produced by firms to the price level in the long run. 
C) is vertical because there is one price level and an infinite number of outputs. 
D) is determined by the real output demanded by economic agents in an economy. 
A) relates the level of nominal output produced by firms to the implicit price deflator. 
B) relates the level of output produced by firms to the price level in the long run. 
C) is vertical because there is one price level and an infinite number of outputs. 
D) is determined by the real output demanded by economic agents in an economy.

Question 16

Which of the following best explains why cities want business conventions, political conventions, and major sports events to be held in their town?

Accepted Answer

A) Because these activities will boost tourism and attract people who will create a demand for the city's goods and services. 
B) Because this initial change in spending generated by these activities begins the multiplier process so that the final increase in the city's real GDP demanded is much larger than the initial spending on these activities alone would cause. 
C) Because federal and state spending in these cities will increase, thus initiating the multiplier process. 
D) Because these activities create jobs and boost spending, which in turn increases the city's tax revenues from income and sales. 
A) Because these activities will boost tourism and attract people who will create a demand for the city's goods and services. 
B) Because this initial change in spending generated by these activities begins the multiplier process so that the final increase in the city's real GDP demanded is much larger than the initial spending on these activities alone would cause. 
C) Because federal and state spending in these cities will increase, thus initiating the multiplier process. 
D) Because these activities create jobs and boost spending, which in turn increases the city's tax revenues from income and sales.

Question 17

In the short run, all prices are flexible.

Accepted Answer

A) True 
 B)False

Question 18

Wage and price stickiness

Accepted Answer

A) give rise to a vertical long-run aggregate supply curve. 
B) give rise to a vertical short-run aggregate supply curve. 
C) creates a surplus or a shortage of real GDP. 
D) prevents the economy from producing its potential level of real GDP. 
A) give rise to a vertical long-run aggregate supply curve. 
B) give rise to a vertical short-run aggregate supply curve. 
C) creates a surplus or a shortage of real GDP. 
D) prevents the economy from producing its potential level of real GDP.

Question 19

Figure 7-1
  
-Refer to Figure 7-1.What could have caused the aggregate demand curve to shift to the right from AD1 to AD2?

Accepted Answer

A) an increase in exports 
B) an increase in imports 
C) a decrease in defense spending 
D) an increase in the domestic price level 
A) an increase in exports 
B) an increase in imports 
C) a decrease in defense spending 
D) an increase in the domestic price level

Question 20

Which of the following will not cause a change in aggregate demand?

Accepted Answer

A) an increase in consumer wealth 
B) an increase in the amount of investment demanded by firms at each price level 
C) an increase in an economy's price level 
D) an increase in the price level of a foreign economy 
A) an increase in consumer wealth 
B) an increase in the amount of investment demanded by firms at each price level 
C) an increase in an economy's price level 
D) an increase in the price level of a foreign economy

Exam 22: Aggregate Demand and Aggregate Supply

Public policy to eliminate a recessionary gap could involve an increase in taxes.

Which of the following will decrease the short-run aggregate supply?

Suppose the U.S.government decides to increase its imports from Turkey.All other things unchanged,

The aggregate demand curve shifts due to changes in consumption expenditures, investment expenditures, government purchases, or net exports.

All other things unchanged, an increase in exports relative to imports will

What happens in the domestic economy when there is an increase in foreign prices, all other things unchanged?

Suppose the economy is initially in long-run equilibrium.Which of the following events leads to an increase in the price level and a decrease in real GDP in the short run?

What are the four sources of aggregate demand?

Public policy to eliminate inflationary or recessionary gaps is called stabilization policy.

When an economy fails to produce at its potential, I.there may be actions that the government or the central bank can take to push the economy toward its potential. II.the unemployment rate is below its natural rate. III.the average price level is likely to rise.

Aggregate demand is the total value of real GDP that

The aggregate demand curve shifts when the quantity of real GDP demanded at every price level changes.

All other things unchanged, a higher exchange rate

Which of the following will increase the short-run aggregate supply?

The long-run aggregate supply curve

Which of the following best explains why cities want business conventions, political conventions, and major sports events to be held in their town?

In the short run, all prices are flexible.

Wage and price stickiness

Figure 7-1 -Refer to Figure 7-1.What could have caused the aggregate demand curve to shift to the right from AD1 to AD2?

Which of the following will not cause a change in aggregate demand?

Economics: the Study of Choice

Confronting Scarcity: Choices in Production

Demand and Supply

Applications of Demand and Supply

Macroeconomics: the Big Picture

Measuring Total Output and Income

Aggregate Demand and Aggregate Supply

Economic Growth

The Nature and Creation of Money

Monopoly

The World of Imperfect Competition

Wages and Employment in Perfect Competition

Interest Rates and the Markets for Capital and Natural Resources

Imperfectly Competitive Markets for Factors of Production

Public Finance and Public Choice

Inflation and Unemployment

International Trade

The Economics of the Environment

Inequality, Poverty, and Discrimination

Macroeconomics: the Big Picture

Measuring Total Income and Output

Economic Growth

The Nature and Creation of Money

Financial Markets and the Economy

Monetary Policy and the Fed

Government and Fiscal Policy

Consumption and the Aggregate Expenditures Model

Investment and Economic Activity

Net Exports and International Finance

Macro Inflation and Unemployment

Macro a Brief History of Macroeconomic Thought and Policy

Economic Development

Socialist Economies in Transition

Filters

Figure 7-1 -Refer to Figure 7-1.What could have caused the aggregate demand curve to shift to the right from AD₁ to AD₂?